A Carbon Tax Would Wallop Our Economy

Today, the National Association of Manufacturers (NAM) released a study conducted by NERA Economic Consulting that shows a carbon tax would have a devastating impact on manufacturing and jobs. The report, titled Economic Outcomes of a U.S. Carbon Tax, found that levying such a tax would impact millions of jobs and result in higher prices for natural gas, electricity, gasoline and other energy commodities. Manufacturing output in energy-intensive sectors could drop by as much as 15.0 percent and in non-energy-intensive sectors by as much as 7.7 percent.

“The notion that some policymakers have in Washington that an economy-wide tax of this nature is a good idea is flatly wrong,” said NAM President and CEO Jay Timmons. “Our nation’s economy and family budgets can’t take it. As consumers of one-third of our nation’s energy supply, manufacturers and our employees will struggle with higher energy prices. A carbon tax will severely harm our ability to compete with other nations.”

Other key findings of the report include the following:

A carbon tax would lead to lower real wage rates because companies would have higher costs and lower labor productivity. Over time, workers’ incomes could decline relative to baseline levels by as much as 8.5 percent.

The impact on jobs would be substantial, with a loss of worker income equivalent to between 1.3 million and 1.5 million jobs in 2013 and between 3.8 million and 21 million by 2053.

Any revenue raised from the carbon tax would be far outweighed by the negative effects on the economy.

A carbon tax would have a negative effect on consumption, investment and jobs, resulting in lower federal revenue from taxes on capital and labor.

The increased costs of coal, natural gas and petroleum products due to a carbon tax would ripple throughout the economy, resulting in higher production costs and less spending on non-energy goods.

“For manufacturers, a carbon tax would cause a net negative impact on output and productivity as the higher energy costs it imposes would ripple through all their supply chains,” said NERA Senior Vice President Anne E. Smith who conducted the research for the NAM. “In turn, higher production costs and reduction in output would ripple through the rest of the economy, reducing household incomes and consumption. A carbon tax would negatively impact the U.S. economy as a whole under both scenarios examined in this study.”

The study looks at two carbon tax scenarios: one levied at $20 per ton increasing at 4 percent and the other designed to reduce carbon dioxide (CO2) emissions by 80 percent. Both cases would have a negative impact on the economy. Please click on the links for the executive summary and full report and for information on 10 hard hit states.